Clarkson v Davies - [1917] HCA 40

36.2 HIGH COURT

[1917.

H.C. OF A.profit and loss on its transactions, including that balance which is

1917.	brought over into the period and that which is carried forward out
M e a b e s	of the period.

A c t in g Holding that opinion, I am bound to come to the conclusion that

Fedeeal

C o m m is

the appellant fails to make out his case, and I dismiss the appeal

s io n e r

T a x a t io n .

with costs.

Appeal dismissed with costs.

Solicitors for the appellant, Meares & Duigan.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor

for the Commonwealth.

B. L.

[HIGH COURT OF AUSTRALIA.]

DUTTON .

Appellant;

P l a in t if f ,

AND

GORTON AND OTHERS

R espo n d en ts .

D e f e n *d a n t s ,

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES.

H. C. OF A. 1916-1917.

Company— Rights of minority of shareholders— Refusal of company to enforce its

S y d n e y ,rights— Attempt of majority of shareholders to benefit themselves at expense of

Dec. 13-15,

minority.

18-21, 1916;

Aug. 31, In an action by a minority of the shareholders of the A Company, which

1917.owned a patent for a certain process, against certain other shareholders and the B Company, of which also those others were shareholders, claiming that

Griffith

C .J.,

Barton, Isaacs, G-avaD Duffy the B Company might be restrained from infringing the patent, it was alleged

and Rich j j .

that those other shareholders had obtained a majority of the votes in the A

23 C.L.R.] OF AUSTRALIA.

363

Company for the purpose of preventing, and were thereby preventing, the A H. C. of A.

Company from taking proceedings to vindicate the right of the A Company 1916-1917.

to the patent and the use of the process as against the B Company.

'—■—'

Duttox

Held, by Isaacs, Oavan Duffy and Rich JJ . {Griffith C.J. and Barton J.

dissenting) on the evidence, that the majority of the shareholders of the A

Gortox.

Company had determined by means of voting power constituted for the pur pose either to make a present to themselves and others, but mainly to them selves, at the expense of the minority, or to prevent the minority in a most proper case from obtaining the decision of a Court as to whether such a present had been made, and that the minority were entitled to maintain the action and to obtain a declaration that the B Company was infringing the patent.

Decision of the Supremo Court of New South Wales (Harvey J.) reversed.

Appeal from the Supreme Court of New South Wales.

A suit was brought in the Supreme Court in Equity by Herbert de Courcy Dutton, on behalf of himself and all the other shareholders of the New South Wales Powell Wood Process…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Clarkson v Davies

Details

AGLC: Dutton v Gorton [1917] HCA 40
Case: [1917] HCA 40
Decision Date: 31 August 1917

CaseChat Overview and Summary

In *Clarkson v Davies*, the Supreme Court of New South Wales considered a dispute between minority shareholders and the majority shareholders of a company. The minority shareholders sought to compel the company to enforce its rights, alleging that the majority shareholders were attempting to benefit themselves at the expense of the minority.

The central legal issue before the Court was whether the minority shareholders could, in the circumstances, initiate legal proceedings in the name of the company to enforce its rights, particularly where the company itself, controlled by the majority, had refused to do so. This involved an examination of the rule in *Foss v Harbottle* and its exceptions, specifically concerning situations where the majority's actions amounted to a fraud or oppressive conduct against the minority.

The Court applied the principles established in *Foss v Harbottle*, which generally holds that the proper person to sue on behalf of a company is the company itself. However, the Court recognised that an exception exists where the alleged wrongdoers are the majority of shareholders, and their actions constitute a fraud on the minority. In such cases, minority shareholders may be permitted to bring a derivative action. The Court considered the nature of the alleged benefit to the majority and the detriment to the minority, and whether this amounted to a breach of the majority's fiduciary duties to the company and its shareholders.

The Court ultimately found that the circumstances warranted the minority shareholders bringing proceedings in the name of the company. The majority's actions were deemed to be of a nature that prevented the company from acting in its own best interests, thereby justifying the intervention of the minority shareholders through a derivative action.

Orders